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Austin v. Pacific States Securities Corp.

California Court of Appeals, First District, First Division
Feb 2, 1961
10 Cal. Rptr. 621 (Cal. Ct. App. 1961)

Opinion

Hearing Granted March 29, 1961.

Opinion vacated 15 Cal.Rptr. 817.

Johnson & Harmon, San Francisco, for appellants.

Weinstock, Anderson, Maloney & Chase, San Francisco, for respondent.


TOBRINER, Justice.

This case involves the single question whether an amendment to a complaint constitutes an attempt to state a new cause Appellants (and others not appealing the judgment) filed a complaint 'to Recover Money and Stock' on September 19, 1957, against 'Pacific States Securities Corporation, a corporation, John H. Bunce, Jr., Thomas F. J. Carroll, Jr., William B. Acton, First Doe, Second Doe, Third Doe Company, a corporation, and Fourth Doe Company, a copartnership.' Each of the appellants alleged that they entered into business dealings with the defendants 'whereby defendants as brokers purchased and sold or purported to purchase and sell securities for said plaintiffs;' that defendants during specifically named periods received certain amounts of money from appellants and 'are now in possession of * * * items of money and property'; that appellants demanded of defendants 'that they pay over and deliver * * * said money and shares of stock, but that defendants have wholly failed, neglected and refused so to do, and that the whole thereof is due, owing and unpaid' to appellants.

Appellants further alleged that defendant Pacific States Securities Corporation is a California corporation; that the other named defendants are its officers and sole shareholders; that the corporation was and is inadequately financed; that the corporation lacks the assets to make appellants whole; that in making application to the Corporation Commissioner for a license to act as securities brokers defendants 'filed therewith surety bond in the sum of $5,000.00 for the faithful performance of its duties as a licensed broker * * *.' Appellants asked leave to amend the complaint to show the true and correct names of the fictitiously named defendants when discovered. Defendant Pacific States Securities Corporation answered the complaint, denying any dealings with any of the appellants or any liability.

On September 10, 1959, almost two years after filing the original complaint, appellants moved to file an amended complaint and for issuance of an alias summons to serve upon respondent, Massachusetts Bonding & Insurance Company. The court granted the motion. In their amended complaint, filed on October 8, 1959, appellants amplified the statement regarding the surety bond, as follows: '[Defendants] filed therewith surety bond with itself as principal and the defendant Massachusetts Bonding and Insurance Company as surety, in the sum of $5,000.00 for the faithful performance of its duties as a licensed broker * * *.' Appellants attached to and made a part of the complaint a copy of the surety bond, inserting a specific allegation regarding respondent: 'That the defendant Massachusetts Bonding and Insurance Company, herein originally sued as Third Doe Company, a corporation is and at all times herein mentioned was a corporation of the State of Massachusetts and was and is duly qualified to do business in the State of California as a surety and bonding company; that on or about April 17, 1957, said defendant Massachusetts Bonding and Insurance Company duly made, executed and delivered to defendant Pacific State Securities Corporation the surety bond, Exhibit A hereto, which was thereupon filed with the Corporation Commissioner of the State of California.' Appellants sought judgment against respondent on the bond, leaving substantially unchanged the remaining allegations of the complaint. Respondent demurred on the ground that the amended complaint showed on its face that the action would not lie since, under the terms of the bond, no such cause 'may be brought after the expiration of two years from and after the time when the act or default complained of may have occurred.' The trial court sustained the demurrer without leave to amend and rendered judgment against appellants as to respondent.

Appellants claim that the original complaint 'imprefectly alleges a surety obligation on a specific bond' and that the amended complaint merely 'perfects the imperfectly stated cause against the surety, and calls the surety defendant by its right name.' Respondent denies the presence, in the original complaint, of 'even the slightest attempt to state a cause of action against the surety on that bond' and contends that '[t]he purpose of the allegations concerning the surety bond and the other allegations set forth in Paragraph I of the original Complaint is to show that defendant Pacific States Securities Corporation desired to qualify with the appropriate state and federal agencies as a stock brokerage firm,' and that such allegation is 'surplus.'

The sole issue, thus, becomes whether appellants engaged in an attempt in the original complaint to state a cause of action against respondent, in which case the amendment would relate back to the date of that complaint (Day v. Western Loan & Bldg. Co., 1940, 42 Cal.App.2d 226, 231, 108 P.2d 702), or did not engage in such an attempt, in which case, as the trial court held, the provisions of the bond bar the action. Gates v. Wendling Nathan Co., 1938, 27 Cal.App.2d 307, 315, 81 P.2d 173.

While there are manifold situations in which amendments may be treated as 'relating back' to the commencement of the suit for purposes of the statute of limitations (2 Witkin, California Procedure, p. 1617 ff), our case presents an amendment to substitute a new defendant for a fictitious one in order to hold it liable upon the allegations of the original complaint. The decisions hold that in such circumstances, in order that the amendment relate back to the original filing, the complaint must disclose a bona fide attempt to state a cause of action against the substituted party. The rule is set out in Gates v. Wendling Nathan Co., supra, 27 Cal.App.2d 307, 81 P.2d 173: 'We are not, of course, unmindful of the settled rule that a bona fide attempt to state a cause of action against a party, which fails by reason of some imperfections, may be remedied by amendment so that the amended pleading will relate back to the date of the filing of the original defective pleading and avoid the running of the statute of limitations in the interim (Ruiz v. Santa Barbara Gas & Elec. Co., 164 Cal. 188, 194, 195, 128 P. 330; Rauer's Law, etc., Co. v. Leffingwell, 11 Cal.App. 494, 105 P. 427), but we have yet to read of a case where the running of the statute has been held to be avoided by filing a complaint wherein a defendant is designated by a fictitious name and the only allegations as to him are that the plaintiff is ignorant of the defendant's true name and, when he knows it, will amend by substituting it, and at that future time make some charge against such defendant.' 27 Cal.App.2d at page 315, 81 P.2d at page 177. To the same effect: Kolodziejski v. Hover, 1954, 124 Cal.App.2d 731, 733, 269 P.2d 163; Stanley v. Kawakami, 1954, 127 Cal.App.2d 277, 278, 273 P.2d 709; Sullivan v. Wright, 1954, 124 Cal.App.2d 836, 838, 269 P.2d 671.

The original complaint did not disclose an attempt to state a cause of action against respondent surety company; it referred to the surety bond only incidentally among allegations regarding the establishment, qualifications, structure, ownership, and management of the defendant corporation. While the complaint alleged that defendants violated their obligations as securities brokers, it leveled no charge at all against the surety company as to any breach of its obligations. At no point did appellants assert the obligation of the bond or request the Day v. Western Loan & Building Co., supra, 42 Cal.App.2d 226, 108 P.2d 702, cited by appellants as 'in point on our facts,' does not sustain their position. In the original complaint in that case plaintiff charged a named defendant with negligence in operating an automobile. The complaint further stated that plaintiff 'joined the other [fictitious] defendants * * * for the reason that he does not know their true names and if it so develops that they or any of them * * * was the owner of said automobile and controlled same at the time said injuries were sustained that plaintiff may when the true names of said defendants be ascertained insert said true names * * * with apt and proper words to charge said defendants.' 42 Cal.App.2d at page 228, 108 P.2d at page 703; emphasis added. After the statute of limitations had run, plaintiff, for the second time, amended the complaint, inserting defendant's name and charging that the driver was operating the automobile for defendant 'in the course and scope' of the driver's employment. 42 Cal.App.2d at page 230, 108 P.2d at page 704. This court, speaking through Justice Peters, held: 'The word 'controlled' clearly implies that respondent [plaintiff] was seeking a recovery against any fictitiously named defendant if that defendant was the employer of the driver, and if the latter was acting in the course and scope of his employment at the time the injuries were received by respondent [plaintiff].' 42 Cal.App.2d at page 233, 108 P.2d at page 705. Thus plaintiff had not pleaded a new cause of action based on respondent superior in the amended pleading but had perfected 'a defective imperfectly stated cause of action * * *.' 24 Cal.App.2d at page 236, 108 P.2d at page 707.

Other cases cited by appellants do not resolve the precise point before us. Larson v. Barnett, 1950, 101 Cal.App.2d 282, 288, 225 P.2d 297, does no more than set forth the general rule that a new party, properly substituted for a fictitious one, cannot rely upon the statute of limitations as a defense. Brooks v. E. J. Willig Truck Transp. Co., 1953, 40 Cal.2d 669, 681, 255 P.2d 802, involves an alleged change in the theory of the complaint rather than th induction of a new party in the place of a fictitious one. The cases of Wennerholm v. Stanford Univ. Sch. of Med., 1942, 20 Cal.2d 713, 128 P.2d 522, 141 A.L.R. 1358, and Taylor v. Marine Cooks & Stewards Ass'n, 1953, 117 Cal.App.2d 556, 256 P.2d 595, fall into the same classification.

Finally, the broad view advocated by appellants that the amendment 'is proper even after the running of the statute of limitations if the amended facts are not unrelated to those set forth in the original complaint' (emphasis added) goes further than the present California law. As stated by Witkin, 'In the majority of the cases in which the broad view is stated the amendment merely changed the parties, the remedy or the legal theory of recovery, without changing the cause of action; or it merely corrected defects in the original pleading of the same cause. * * * Where the amendment actually does change the cause of action or adds a new cause of action, the cases quite uniformly hold it improper.' (2 Witkin, California Procedure, supra, § 605, p. 1618.)

In the original complaint appellants neither stated, nor attempted to state, a cause of action on the bond. The reference to the bond is buried in the interstices of the allegations. We cannot recreate that reference into an attempted cause of action.

We affirm the judgment.

BRAY, P.J., and DUNIWAY, J., concur.


Summaries of

Austin v. Pacific States Securities Corp.

California Court of Appeals, First District, First Division
Feb 2, 1961
10 Cal. Rptr. 621 (Cal. Ct. App. 1961)
Case details for

Austin v. Pacific States Securities Corp.

Case Details

Full title:Harry E. AUSTIN, Charles Ewen, Miles Santos, Harry Topping, Harry C. Suze…

Court:California Court of Appeals, First District, First Division

Date published: Feb 2, 1961

Citations

10 Cal. Rptr. 621 (Cal. Ct. App. 1961)